Drivers could soon be charged £70 a year to travel on UK roads under new plans

The transition from petrol and diesel vehicles to electric cars has sparked an urgent need for a rethink on road usage charges, says Tony Blair's think tank. With fuel duty income predicted to plummet, creating a financial void in government coffers, alternatives such as pay-per-mile schemes are being considered.

Rachel Reeves is anticipated to announce the end of a temporary 5p reduction in fuel duty, possibly coupled with an inflationary increase in tax on petrol and diesel at the pumps, in her budget next Wednesday. However, the Tony Blair Institute suggests that instead of reinstating fuel duty rates as planned, Reeves should introduce a simple road pricing system of 1p per mile for cars and vans, and between 2.5p to 4p for lorries and heavy goods vehicles, reports the Express.

A new report from the institute argues that this change would generate the same revenue from motorists as the Treasury expects to raise from ending the 2022 temporary cut in fuel duty – making it potentially less politically contentious if implemented now rather than later. The Blair government's attempts in 2007 to introduce widespread road tolling faced public backlash and a record number of objections via a parliamentary petition.

However, the rise of electric cars and the potential loss of fuel duty income, which currently generates around £25 billion annually, has reignited calls for reform.

According to The Guardian, the Tony Blair Institute is advocating for the implementation of a low-level road pricing scheme as "a crucial step in reforming the UK's system of motoring taxation for the electric-vehicle era [and] help prevent a growth-stifling rise in road congestion". The institute anticipates that the initial charge would cost the average motorist about £70 per year, determined by mileage recorded from cars' odometers during their annual MOT test.

While the report suggests freezing fuel duty rather than eliminating it, this tax is expected to become obsolete as vehicles transition to zero emissions, with the price per mile estimated to reach around 10-12p by the year 2050.

In light of widespread speculation and discussions on reforms—buoyed by comments from Sir John Armitt, the head of the National Infrastructure Commission, declaring road pricing "inevitable"—various groups are pushing for changes. Organisations like the Campaign for Better Transport are among those calling for the introduction of pay-per-mile charges for electric vehicles.

Even automotive services company RAC acknowledges the coming shift. Earlier this year, RAC's head of policy Simon Williams commented: "As more and more EVs come on to the roads the Government will need to tax drivers differently. We think replacing fuel duty with a pay-per-mile system as soon as possible is the way forward as then the only tax levied on fuel would be VAT. This would give retailers nowhere to hide."

A spokesperson for the government clarified: "We have no plans to introduce road pricing. We are committed to supporting our automotive sector as we transition to electric vehicles in order to meet our legally binding climate targets."